These days it seems most of the youth of the world is woefully uninformed when it comes to financial literacy. I was lucky to have parents who taught me early on about credit. Even when I found myself, in my twenties and thirties, underpaid and overworked, living above my means with the help of numerous credit cards, I still knew how to right my own financial ship. It seems that for the most part, today’s youth do not have the same experience or knowledge.
I know plenty of people, even in the Gen X and Baby Boomer generations, who consider owning their own piece of property pretty much out of reach in today’s world. Many of them cannot afford today’s rent prices either. This is glum on so many levels. I mean, who wants to move back in with their parents in their mid-forties? Sadly, I’ve seen this one too many times in the recent past. To make matters worse, rents all over the world are skyrocketing and the cost of living is only rising.
I’m always interested in hearing from people who offer actual solutions to problems, so I recently interviewed Mo Rafi of Rafi Credit Consulting. Mr. Rafi is based in Canada, but there are plenty of similarities between Canada’s banking system and the United States.
Rafi Credit Consulting is a financial education company. Mr. Rafi spent years working at many of Canada’s different banks and as a side effect, he learned each bank’s systems and processes very intimately. He then realized this was a skill that could be taught and shown to people. A big emphasis of Rafi Credit Consulting’s program is to teach financial literacy, and how money actually works, with a focus on credit. Nobody else in Canada is really doing this type of work, and it certainly is needed.
While his company serves all types of clients, the majority tend to be of the younger generations- mainly Millennials and Generation Z. Mr. Rafi says that there is an epidemic of younger generations not having enough money and living paycheck to paycheck and a poor quality of life. Just as in the United States, it’s as though the “middle class” is shrinking. Many people don’t know where to turn or what to do. Most of the younger people Mr. Rafi works with view their financial situation rather bleakly, with their dream of owning their own piece of real estate seeming to be so out of reach. He finds most of the young people still want to own their own property but feel it is just so unrealistic. Sadly, many of them have given up on the idea and find themselves working harder and harder with less time for just about anything else.
Take sky-high rent prices, the spiking cost of living and then add into the mix just plain crazy student loan debt, and you have quite a depressing financial outlook for these people. Yet owning real estate is still very desirable to the majority of his clients.
But wait, this isn’t what I see propagated on television! It seems the media must be living in some alternate reality, because all I ever see and hear is how the younger generations are making so much money and they just love to live in more communal arrangements, eschewing single family homes and preferring multi-family dwellings such as apartment buildings. These clearly very wealthy and tech-savvy young people all have the latest iPhone, drive the newest luxury vehicles and have enough expendable cash and free time to travel the globe in style.
What happened to “You’ll own nothing and be happy”?
Normally, an absolute maximum of 30% of your paycheck should go toward rent. Mr. Rafi informed me that the norm has now become 50% or even 60%. The good news is that his company can give people relief by explaining certain financial concepts and systems so they have a genuine understanding of what they can do to increase their quality of life and not have to be so overworked and underpaid.
For someone trying to buy their first house and finding it seemingly out of reach, Mr. Rafi’s number one piece of advice would be to think outside of the box. Mr. Rafi explained that traditional advice is completely broken now. There are several methods of creative financing. One can purchase an investment property, in a much cheaper area, rather than a primary residence. They could also partner with real estate investors, or simply look at the numbers from a different perspective. With a good enough credit score, anything is possible.
The overall feeling amongst people in their twenties and thirties is that debt is a bad thing, when really ALL money is debt! The whole system is debt. Mr. Rafi feels that the biggest disconnect when it comes to credit and money is the distinction between “good debt” and “bad debt”. For instance, having twelve mortgages means you have twelve streams of income, but having twelve maxed out credit cards is an entirely different story. The credit scoring model comes down to how much debt the person has, if they have been paying it on time, and how long they have had a relationship with the bank or credit union. The system can be used to one’s advantage. Rafi Credit Consulting can offer financial education, solutions, and hope for what may seem like a hopeless situation.
Is property ownership largely out of reach for our youngest generations? No, it is definitely not. It may require some hard work, discipline and creative thinking, but it is still very much attainable.